It’s Over!

By: Chris Tell

At a “pitch fest” a few nights ago, while sitting listening to the companies present their stories, and questioning the founders, one particular company struck me as a glaring outcast.

I’ll tell you why they were an outcast, but first…

After just a few pointed questions I discovered that this company was struggling to achieve revenue growth, and they were a long ways off from profitability. Here are a couple of reasons why:

  1. High staff count all located in the developed world.
  2. Huge OPEX relative to many of the companies which operate in their space, which was almost entirely driven by point 1 above.

Later the same day I called my insurance company and got through to a call desk. I spoke with “Jacindra”. After prying a bit I find she’s in Manila. The reason the company I mentioned above is struggling to compete and become profitable is because they are providing a service not distinctly different than their competitors, yet they are paying multiples for things like labor. They are shouting from the rooftops that they’re “local”, but you know what, that’s not scalable, and further more I don’t care.

Do I care if Joey, a “local” in some developed world country loses his job to Jacindra in Manila? No. I congratulate Jacindra on dragging herself out of poverty with the aid of technology, and I thank her for the fact that the product I’m receiving is likely cheaper than it would otherwise be.

I hope “Joey” adapts to this change and finds a way to produce more value than he’s currently worth, possibly in a completely different field. Change, especially if you’re on the rough end of it is tough, but remember we’d all be still sitting in caves if it weren’t for innovation and technological change.

General Electric, Caterpillar, Microsoft, Wal-Mart, Chevron, Cisco, Intel, Stanley Works, Merck, United Technologies, and Oracle cut their workforces by 2.9 million people over the last decade while hiring 2.4 million people overseas.

I see it every day… people losing jobs, having to retrain, change strategies and find ways to create value. “Cubicle jobs” are over. Sure there are still large swathes of “cubicle dwellers”, but it’s over, done, finished… I’m telling you.

Every day more and more people realise it. It’s unfortunate for those who refuse to acknowledge it, even though its been staring them in the face for over a decade they’ve somehow managed to remain blind to it.

manpayrolls
I’ve had angry people pop out of the woodwork when I’ve written about why education is broken. I suggested that the large educational institutions revenue models are fatally flawed and will see a sea change in the coming years, causing many in the industry to be forced to adjust.

I can understand the anger. Nasty surprises threatening the status-quo always get people angry when they’re benefiting from the setup.

If you’re sitting in a job which can be outsourced your clock is ticking. First cheaper labour, then better technology together with cheap labour, and shortly robots. You will be replaced, it’s just a matter of time. This is a good thing.

Don’t cling to the past, or the present too hard. Things you cling to tend to disappoint. The world is dynamic not linear, yet humans love to think in a linear fashion. This is how bubbles are created. This is how WhatsApp sells for more than the entire market cap of one of the world’s fastest growing economies. Humans love certainty and certainty only exists in a linear framework in textbooks, it never exists in nature and it never exists in economics for long.

You’ve probably read about the massive protests across major EU cities by local taxi drivers. Why are they so angry? Because their ability to charge hapless pedestrians 2 blocks for $10 is coming to an end. GOOD! Once again an inferior product or service is being eroded by technology. Uber is single-handedly destroying them by providing greater efficiency and productivity at a lower cost.

Regulating and legislating who can give me a ride and act as a taxi impresses me as ludicrous, but that’s the way much of the world operates when Government gets involved. It destroys entrepreneurship, it destroys productivity and as a result it does the very opposite of its stated purpose. Ultimately it causes a build up of waste and excess which would not exist without it.

When Mark and I were in Mongolia a couple of years ago we noticed quickly that every vehicle was a taxi. If you stood on the road and held out your hand someone would stop. Why? Because they can make a few bucks by picking up a “fare”. Regular folks, on their way wherever. Why not? All Uber has done is to make that exact premise more efficient and add a little “flare” to it.

Luddites
This is an illustration from an old newspaper. Those are British weavers destroying textile machines in the early nineteenth century. Like the taxi drivers of today, and the cubicle workers, they were angry at technology. Should government have legislated against textile machines so that today we would still be struggling to find decent clothing? Think of the colossal waste of resources, of all the men and women who would be weaving clothing for the world’s population, of the poor quality fabrics and massive losses in efficiency.

I humbly suggest their time would have been better spent figuring out how to leverage the technology to provide a better service or product. The same people exist today. Humans don’t change. Circumstances change, technology changes but human nature never changes.

Socialists vs Capitalists

I previously wrote an article about these two distinctly different mindsets, in which I said:

The first is a group who believe that the world, its peoples, resources, skills and wealth are one giant pie. They essentially believe that individuals don’t have a right to their own bodies, efforts and thoughts. In their vision the pie does NOT increase or decrease in size, but what happens to the pie is that the slices get shifted around between various groups of people within the world. Their major concern is with how much of the pie they personally get relative to others. The aggregate amount is not as important as the relative amount.

What is preferable for them is getting less pie, provided others are getting twice as little. They will opt for this rather than receiving twice as much, where others are receiving four times as much. They couch this view of the world, and distribution of aforementioned skills, wealth and resources etcetera in platitudes such as “equality”, “fairness” and “justice”.

This group of people will typically support “free healthcare”, “free education” and any other “freebies” that they will not directly have to pay for. They will be ardent supporters of bigger, more intrusive government, as this is the only avenue they see available for the execution of their perfect world. Articulating it as such would be difficult for many of them, as it exposes their view of the world as one completely lacking in freedom of the individual.

The second group of people realizes that there is an existing pie, but are not overly concerned with its size or distribution, since their thoughts typically revolve around building their own pie and adding to the size of the existing pie. They don’t see the pie as a stagnant concept, but rather something that they themselves can participate in forming and shaping.

This second group believes they have the right to their own bodies, efforts and thoughts. They accept that there are others in the world that will have a greater slice of pie than they do, but since they obtain their value and self-worth from building the pie, this concerns them little. They understand that the journey and not the destination are what matters.

Since they have courage and a belief in their own abilities they find the idea of relying on others to support them through “free” anything to be immoral, and although not all will articulate it, they are distrustful of anyone purporting to “help” them, especially when it comes at no cost.  They choose to slog their way through the world on their own merits, and give back by creating wealth and opportunity for themselves and others.

The robots are coming… invest in what’s coming tomorrow, because it’s likely better than any of us can imagine.

- Chris

“Do what you can do best and outsource the rest.” – Tom Peters